Is LALDX a strong bond fund right now?

Government Bond - Short fund seekers should consider taking a look at Lord Abbett Short Duration Income A (LALDX). LALDX carries a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

We note that LALDX is a Government Bond - Short option, and this area is loaded with many different choices. Have securities issued by the United States' federal government in their portfolios. Generally, these are seen as extremely low risk from a default perspective and often regarded as risk-free. Government Bond - Short funds focus on the short end of the curve, which results in lower yields, but less sensitivity to interest rate fluctuations.

History of fund/manager

Lord Abbett is responsible for LALDX, and the company is based out of Jersey City, NJ. The Lord Abbett Short Duration Income A made its debut in November of 1993 and LALDX has managed to accumulate roughly $7.18 billion in assets, as of the most recently available information. The fund's current manager is a team of investment professionals.

Performance

Of course, investors look for strong performance in funds. LALDX has a 5-year annualized total return of 2.56%, and is in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 5.63%, which places it in the middle third during this time-frame.

It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. LALDX's standard deviation over the past three years is 1.81% compared to the category average of 10.91%. Over the past 5 years, the standard deviation of the fund is 2.15% compared to the category average of 12.12%. This makes the fund less volatile than its peers over the past half-decade.

Bond duration

Modified duration is a measure of a given bond's interest rate sensitivity, so when judging how fixed income securities will respond in a shifting rate environment, it is an excellent figure to look at.

For those that believe interest rates will rise, this is an important factor to consider. LALDX has a modified duration of 2, which suggests that the fund will decline 2% for every hundred-basis-point increase in interest rates.

Income

Income is often a big reason for purchasing a fixed income security, so it is important to consider the fund's average coupon. This metric calculates the fund's average payout in a given year. For example, this fund's average coupon of 4.81% means that a $10,000 investment should result in a yearly payout of $481.

For those seeking a strong level of current income, a higher coupon is typically good news. However, it could pose a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond. Investors also need to consider risk relative to broad benchmarks, as income is only one part of the bond picture.

This fund has a beta of 0.28, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, LALDX has a positive alpha of 0.41, which measures performance on a risk-adjusted basis.

Ratings

Investors should also consider a bond's rating, which is a grade "AAA" to "D" given to a bond that indicates its credit quality. With this letter scale in mind, LALDX has 31.02% in high quality bonds rated at least "AA" or higher, while 49.84% are of medium quality, with ratings of "A" to "BBB". The fund has an average quality of A, and focuses on high quality securities.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, LALDX is a load fund. It has an expense ratio of 0.59% compared to the category average of 0.91%. From a cost perspective, LALDX is actually cheaper than its peers.

This fund requires a minimum initial investment of $1,500, while there is no minimum for each subsequent investment.

Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.

Bottom line

Overall, Lord Abbett Short Duration Income A ( LALDX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, better downside risk, and lower fees, this fund looks like a good potential choice for investors right now.